When is the RBNZ and how it could affect NZD/USD?

Early Wednesday at 02:00 GMT market sees the monetary policy decision by the Reserve Bank of New Zealand (RBNZ). Amid widely accepted chatters of New Zealand’s central bank’s rate hike in 2021, today’s monetary policy meeting becomes the key despite lacking the economic forecast announcements.

It’s worth noting that the RBNZ policymakers have been silent of late and the covid concerns are comparatively less severe than the other Pacific counterparts, making it suitable to be the first major central bank to offer a rate hike.

Even so, market consensus favors no change in the benchmark interest rate, currently at 0.25%, or the Large Scale Asset Purchases (LSAP) during today’s monetary policy meeting. The forward guidance, however, be edit the previous line saying, “current levels of stimulus will remain in place for a considerable time.”

Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,

The market has moved a huge amount since the RBNZ May Monetary Policy Statement, and is now punting that the OCR will go up before the end of the year. The move has of course happened amidst radio silence from the RBNZ, so all eyes will be on the Review commentary at 2 pm. There are no forecasts published, so there’s no need for the RBNZ to be prescriptive about precisely when they expect to kick off hikes. We doubt they’ll want to be, with CPI data out on Friday, and key Q2 labor market data due in three weeks.

Also joining the bull’s league is TD Securities that said,

We expect the RBNZ to acknowledge that data outcomes have exceeded expectations. The Bank could back away from commentary around price increases being transitory and indicate price pressures could turn persistent, but it may prefer to wait for Q2 CPI data on 16th July and comment on this in the August statement.

How could it affect NZD/USD?

NZD/USD snaps two-day downtrend, picking up bids to refresh intraday top around 0.6960, up 0.17% on a day, ahead of the RBNZ release during Wednesday’s Asian session. Bullish expectations from the New Zealand central bankers seem to pave the way for the kiwi pair’s latest uptick amid subdued markets. However, covid woes in Asia-Pacific and reflation concerns, recently backed by the US Consumer Price Index (CPI) data, probe the pair buyers.

New Zealand dollar (NZD) is all set to benefit from the RBNZ’s hawkish tone if any. However,  the US dollar’s broad strength could keep poking the NZD/USD bulls until the RBNZ given any clear signal of the rate hike and/or tapering, which are less likely to be unveiled during today’s monetary policy meeting.

Hence, NZD/USD prices can extend the latest corrective pullback on RBNZ’s upbeat statements but downside risks remain amid the broad US dollar strength.

Ahead of the release, FXStreet’s Dhwani Mehta says, “The kiwi’s fate hinges on the US dollar’s price action, especially in light of the US CPI data, which will drop in ahead of the RBNZ announcement. Even if the US inflation figures disappoint, the greenback is likely to hold its advantage as a safe-haven asset amid rapidly spreading Delta covid variant on both sides of the Atlantic.”

Keynotes

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About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.